Media and Entertainment Industry

February, 2017

Introduction

The Indian Media and Entertainment (M&E) industry is a sunrise sector for the economy and is making high growth strides. Proving its resilience to the world, the Indian M&E industry is on the cusp of a strong phase of growth, backed by rising consumer demand and improving advertising revenues.

The industry has been largely driven by increasing digitisation and higher internet usage over the last decade. Internet has almost become a mainstream media for entertainment for most of the people.

Market Dynamics

The Indian media & entertainment sector is expected to grow at a Compound Annual Growth Rate (CAGR) of 14.3 per cent to touch Rs 2.26 trillion (US$ 33.7 billion) by 2020, while revenues from advertising is expected to grow at 15.9 per cent to Rs 99,400 crore (US$ 14.82 billion).

Over FY 2015-20, radio will likely grow at a CAGR of 16.9 per cent, while digital advertising will grow at 33.5 per cent. The largest segment, India’s television industry, is expected to grow at a CAGR of 15 per cent, while print media is expected to grow at a CAGR of 8.6 per cent.!

India is one of the highest spending and fastest growing advertising market globally. The country’s expenditure on advertising is expected to grow more than 12 per cent in 2016, and accelerate to 13.9 per cent in 2017, based on various media events like T20 Cricket World Cup, the Indian Premier League (IPL) and State elections. Television segment, which continues to hold highest share of spending, is expected to grow by 12.3 per cent in 2016 and 12.5 per cent in 2017, led by increased spending by packaged consumer goods brands and e-commerce companies.$

The Foreign Direct Investment (FDI) inflows in the Information and Broadcasting (I&B) sector (including Print Media) in the period April 2000 – March 2016 stood at US$ 4.98 billion, as per data released by Department of Industrial Policy and Promotion (DIPP).

Recent development/Investments

Dentsu Aegis Network Ltd, the UK-based media and digital marketing communications company, has acquired Perfect Relations Group, an independent public relations firm, enabling the company to further strengthen its overall communications offering in the Indian market.

KidZania, a Mexican chain of family entertainment centers, plans to expand its footprint to southern India by investing Rs 100 crore (US$ 14.91 million) for setting up a theme park, which will be spread over 75,000 sq ft, by the end of 2017, or early 2018.

LeEco, the China-based technology company, plans to invest about Rs 1,330 crore (US$ 198.32 million) into developing content for India, including its own produced content, in the next two to three years.

Vice Media LLC, a US-based digital media and broadcasting company, has entered into a Joint Venture (JV) agreement with the Times Group to open a new bureau and production hub in Mumbai, and launch digital, television, mobile and branded content in India.

Cinepolis, a Mexico-based multiplex chain, plans to add 160 more screens by investing around Rs 400 crore (US$ 59.65 million) in India in the next two years, thereby taking its total count to 400 screens in the country.

Dalian Wanda Group Co Ltd, world's largest cinema chain operator, has initiated talks with leading multiplex owners in India such as PVR Ltd and Carnival Cinemas Ltd, to acquire assets and enter the Indian market.

Global video-streaming service Netflix has entered India as high-speed Internet connectivity is becoming rapidly available to Indians and nearly one-fifth of the India's 1.3 billion population is now online.

Reliance Entertainment (owned by Mr Anil Ambani) and DreamWorks (led by Mr Steven Spielberg), along with Participant Media (led by Mr Jeff Skoll) and Entertainment One (eOne) have formed a new film, television and digital content creation company called ‘Amblin Partners’, and have raised US$ 500 million in debt to develop and produce films.

ScoopWhoop, an Indian digital media and content start-up, has raised US$ 4 million from Kalaari Capital and plans to use the funds for expansion of its video production unit called ScoopWhoop Talkies.

Mobvista International Technology Ltd, a global mobile advertising and game publishing company, plans to increase its investment in India by US$ 100 million over 2015-18, with a view to capture a bigger share of the booming e-commerce and ad-tech space.

The digital arm of New Delhi Television Limited (NDTV) namely NDTV Convergence, that owns and operates the NDTV group's digital properties, has signed a deal worth US$ 13-15 million with content discovery platform Taboola.

Cinepolis India Private Limited, the Indian movie exhibition arm of Mexican chain Cinepolis, has plans to add 60 screens to take its total count to over 250 screens by the end of 2015.

Turner International India has announced the expansion of its television bouquet for children with the launch of Toonami, a channel dedicated to animated action. This is the American company’s third children’s channel in India after Cartoon Network and POGO. Toonami joins an assortment of over 15 channels in the kids’ genre, which attracts close to Rs 500 crore (US$ 74.56 million) in advertising.

Government Initiatives

The Government of India has supported Media and Entertainment industry’s growth by taking various initiatives such as digitising the cable distribution sector to attract greater institutional funding, increasing FDI limit from 74 per cent to 100 per cent in cable and DTH satellite platforms, and granting industry status to the film industry for easy access to institutional finance.

Mr Venkaiah Naidu, Union Minister for Housing and Urban Poverty Alleviation and Information & Broadcasting, outlined the Ministry's plans of introducing a National Communication Policy and stated that the government has allocated Rs 100 crore (US$ 14.91 million) to revive community radios stations across the country.

The Union Cabinet has approved the model Shops and Establishment Act, aimed at generating employment prospects by allowing cinema halls, restaurants, shops, banks and other such workplaces to remain open round the clock.

The Ministry of Information and Broadcasting (I&B) is working towards promoting ease of doing business, which will ensure less regulation and facilitate India to become the hub of media and entertainment industry.

The Government is planning to set up a National Centre of Excellence for media, which will provide training to the industry professionals, and has also decided to fund movies, including Bollywood and regional films, for participating in foreign film festivals.

The Union Budget 2016-17 has proposed basic custom duty exemption on newsprint. The customs duty on wood in chips or particles for manufacture of paper, paperboard and newsprint has been reduced to 0 per cent from 5 per cent.

Recently, the Indian and Canadian governments have signed an audio-visual co-production deal that would help producers from both countries to explore their technical, creative, artistic, financial and marketing resources for co-productions and, subsequently, lead to exchange of culture and art amongst them.

Furthermore, the Centre has given the go-ahead for licences to 45 new news and entertainment channels in India. Among those who have secured the licenses include established names such as Star, Sony, Viacom and Zee. Presently, there are 350 broadcasters which cater to 780 channels. “We want more competition and we wanted to open it up for the public. So far, we have approved the licences of 45 new channels. It’s a mix of both news and non-news channels,” said Mr Bimal Julka, Secretary, Ministry of I&B, Government of India.

The Union Cabinet chaired by the Prime Minister, Mr Narendra Modi, has given its approval for entering into an Audio-Visual Co-Production Agreement between India and the Republic of Korea (RoK) and to complete internal ratification procedure, to enable the agreement to come into force. Cooperation between the film industries of the two countries will not only promote export of Indian films but would also act as a catalyst towards creating awareness about India and its culture.

Road Ahead

The Indian Media and Entertainment industry is on an impressive growth path. The revenue from advertising is expected to grow at a CAGR of 13 per cent and will exceed Rs 81,600 crore (US$ 12.09 billion) in 2019 from Rs 41,400 crore (US$ 6.17 billion) in 2014. Internet access has surpassed the print segment as the second-largest segment contributing to the overall pie of M&E industry revenues.

Television and print are expected to remain the largest contributors to the advertising pie in 2018 as well. Internet advertising will emerge as the third-largest segment, with a share of about 16 per cent in the total M&E advertising pie. The film segment which contributed Rs 12,640 crore (US$ 1.88 billion) in 2014 is projected to grow steadily at a CAGR of 10 per cent on the back of higher domestic and overseas box-office collections as well as cable and satellite rights.

Note: ! - KPMG-FICCI Media and Entertainment industry report 2016; @ - as per the ‘Shaping the Industry at a Time of Disruption’ report by Boston Consulting Group (BCG) and Confederation of Indian Industry (CII); # - as per a report by Morgan Stanley; $ - Carat Ad Spend Report, September 2016

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